The recent bankruptcy filing by Tupperware, once a staple of nearly every kitchen, is yet another reminder that long-term corporate success depends on managing through the ever-changing business environment. Many blogs have been written about the ultimate impact on oil and gas producers of the decades-long shift to lower-carbon energy sources, but E&Ps face short-term challenges as well, one of which is the recent plunge in natural gas prices. In today’s RBN blog, we analyze the effect of lower gas prices on the revenues, cash flows, investment, leverage and cash allocation of producers with a rough balance of oil and gas production and discuss how these Diversified producers are adapting.
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In the first part of our blog series on recent financial results from the 40 larger U.S. E&Ps we monitor, we said their pre-tax operating profits rebounded slightly in Q2 2024 to $12.25/boe ($16.6 billion), up 1.8% from the $12.04/boe they reported in Q1 2024. In the quarter, the group as a whole outperformed results from the turbulent half-decade between 2015-20 but fell short of the peak profits and cash flows generated in the post-COVID years. The primary reason was that low natural gas realizations nearly offset the impact of higher liquids realizations for the entire group. As we reviewed in the second part of this series, the brunt of the gas price plunge fell on the Gas-Weighted producers. With a portfolio weighting of just 16% liquids, the 11 gas-focused producers we cover had a brutal quarter. Pre-tax operating profits descended into the red in early 2024, with the group reporting an aggregate $850 million in losses in Q1 as revenues per boe dipped to the lowest level since the pandemic price crash in 2020.
The 13 Diversified E&P companies we track produced 50% oil, 35% natural gas and 15% NGLs in Q2 2024. However, their total revenue from hydrocarbon sales reflected weakening natural gas prices. In Q2, Diversified producers generated 85% of their revenue from crude oil, 8% from natural gas and 7% from NGLs, compared with 80% from oil, 13% from gas and 7% from NGLs in the previous quarter. Total revenue from natural gas fell by 37%, or more than $1 billion, to just $1.8 billion, which nearly offset a $1.3 billion increase in oil revenue to $19.5 billion. Particularly hard hit were the producers with Permian assets, many of which have been hurt by often-negative gas prices at the Waha Hub in West Texas (see Don’t Blame Me).
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About the song
“Bad Moon Rising” was the lead single from Creedence Clearwater Revival’s third album, Green River. Written and produced by John Fogerty, the song was recorded at Wally Heider’s Studio in San Francisco in March 1969. The single reached #2 on the Billboard Hot 100 singles; the Green River LP went to #1 on the Billboard 200 album chart.
John Fogerty has said he wrote “Bad Moon Rising” after watching “The Devil and Daniel Webster,” and was inspired by a scene in the movie involving a hurricane. The last line of the chorus — “There’s a bad moon on the rise” — has often been misheard as "There’s a bathroom on the right," and Fogerty has been known to sing that line sometimes in concert. The song has been used in numerous films and television shows.
Creedence Clearwater Revival, also referred to as CCR, included John Fogerty (lead and backing vocals, lead guitar and piano), Tom Fogerty (rhythm guitar), Stu Cook (bass) and Doug Clifford (drums). The band was formed in the San Francisco Bay area in 1967 and released seven studio albums from 1968 to 1972 — they disbanded in October of that year. John Fogerty went on to have a successful solo career and still tours today. Tom Fogerty (John’s older brother) released several solo albums before passing away in 1990. Stu Cook and Doug Clifford still tour today as Creedence Clearwater Revisited, playing a repertoire of CCR songs. Creedence Clearwater Revival was inducted into the Rock and Roll Hall of Fame in 1993.
